Two other studies that shed light on plan choice in Medicare used data on retirees in
employer-sponsored health benefits programs. Buchmueller (2000) examined how University of
California retirees responded to changes in out-of-pocket premiums caused by a change in the
University’s premium contribution. He estimated price elasticities in the range of –0.12 to –0.24,
depending on the type of plan the retirees was in at the time of the change. In a similar study,
using retiree data between 1997 and 2002 from an employer with roughly 2,700 employees
located in the Southwestern United States, Buchmueller (2005) estimated elasticities ranging
from –0.14 to –0.37, slightly higher than his previous estimates. He attributed the difference to
the latter study’s higher level of variation in price, which depends (exogenously) on when the
individual retired and his or her years of service as of that date. In addition, Buchmueller (2005)
noted that the premiums observed in his study were higher than in the data used by Atherly et al.
(2004), largely explaining the difference between their elasticity estimates.
Medicaid and SCHIP
Although Medicaid prohibits premiums for the categorically eligible population, some states
charge monthly premiums to low-income beneficiaries in their Medicaid expansion programs
(for noncategorical individuals) and in SCHIP. Evidence from a limited number of studies
indicates that premiums reduce Medicaid participation and make it harder for individuals to
responsiveness among either Medicaid or SCHIP beneficiaries is much higher than among
individuals in the private market.
Ku and Coughlin (1999/2000) examined participation rates among people eligible for
premiums set as low as 1 percent of a family’s income lead to an approximately 15 percent
reduction in public program participation. Shenkman and Vogel (2005) examined disenrollment